What is your experience managing a 8 or 9 digit portfolio

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
anpaul147
Posts: 15
Joined: Sun Aug 24, 2014 7:09 pm

What is your experience managing a 8 or 9 digit portfolio

Post by anpaul147 » Sun Aug 24, 2014 7:45 pm

At this scale any AUM percentage based fee makes professional help very expensive. While there are retainer only firms I would think some bogleheads are doing it themselves. I'm interested to hear from first or second hand what the experience has been like: did you start with an advisor and then did it by yourself or started by yourself and then went with a manager or automated solution. There are a lot of questions about people getting this kind of windfall but I haven't found much about people who have been doing it for years on their own.
I'm assuming estate and taxes are handled by professionals, I'm only curious about portfolio management.

User avatar
LadyGeek
Site Admin
Posts: 45612
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: What is your experience managing a 8 or 9 digit portfoli

Post by LadyGeek » Sun Aug 24, 2014 7:56 pm

Welcome! Here are a few threads:

- I need "Ultra High Net Worth" investing advice please
- Help me manage a $7 million portfolio.

(To avoid giving the wrong impression, this forum helps everyone - especially those struggling to meet their monthly expenses.)
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

User avatar
nedsaid
Posts: 9537
Joined: Fri Nov 23, 2012 12:33 pm

Re: What is your experience managing a 8 or 9 digit portfoli

Post by nedsaid » Sun Aug 24, 2014 8:13 pm

Thanks LadyGeek for your comments. I have done okay in life but I have not amassed anywhere near what some posters on this forum have mentioned. Not everyone here is a millionaire and I am glad to see comments that there is good advice here for everyone.
A fool and his money are good for business.

Pizzasteve510
Posts: 635
Joined: Sun Jul 27, 2014 3:32 pm

Re: What is your experience managing a 8 or 9 digit portfoli

Post by Pizzasteve510 » Sun Aug 24, 2014 8:31 pm

My advice. Simple 3 fund portfolio and work hard at your job to earn the most you can.
Last edited by Pizzasteve510 on Fri Sep 19, 2014 9:53 am, edited 1 time in total.

john94549
Posts: 4638
Joined: Tue Jul 26, 2011 8:50 pm

Re: What is your experience managing a 8 or 9 digit portfoli

Post by john94549 » Sun Aug 24, 2014 9:18 pm

Last I counted, I had ten digits on hands (when counted in the aggregate), same on feet, somewhat less in the portfolio.

anpaul147
Posts: 15
Joined: Sun Aug 24, 2014 7:09 pm

Re: What is your experience managing a 8 or 9 digit portfoli

Post by anpaul147 » Mon Aug 25, 2014 12:35 am

LadyGeek, my intent is not to turn this forum into UHNW central but rather to hear about people who have managed a large amount of assets on their own. I've seen plenty of posts asking for advice but what about people who are actually quietly doing it ?
I'm new to the world of investing and the bogleheads approach seems a nobrainer for a normal amount of assets but I'm curious about what people do at the high end of the spectrum. There, I would assume, they have access to the most high end advisors, private banks, etc but yet their fees seem to make no sense from a consumer perspective so then they are probably doing it themselves or else giving up a small fortune in fees every year compounding on their own money bearing all the risks. If UHNW individuals are not doing it themselves and are getting their money worth I'd be curious to hear from direct experience (I've read the arguments about hiring help to avoid selling during crashes or folks thinking that paying the price of a luxury car every year is worth not having to keep up with the finance world).

mac808
Posts: 465
Joined: Mon Sep 19, 2011 8:45 pm

Re: What is your experience managing a 8 or 9 digit portfoli

Post by mac808 » Mon Aug 25, 2014 12:49 am

You can manage 8 or 9 figures on a lazy portfolio model. There's really not much difference if you're liquid (as opposed to most of your net worth tied up in a family business). For advisors, fees drop quickly below .2 for AUM > 25m, so it's still a lot but maybe not as much as you think.

Bubbagump
Posts: 61
Joined: Thu May 09, 2013 11:42 pm

Re: What is your experience managing a 8 or 9 digit portfoli

Post by Bubbagump » Mon Aug 25, 2014 1:12 am

I would say the biggest and really only difference on the investment side of things is being a bit more clever regarding tax efficiency. You will be in a high tax bracket so munis to round out your bond allocation in a taxable account.

As for first and second hand... I spoke with the big shots on a low 8 figure portfolio and they wanted fees, complicated schemes, and hedge funds. After a reality check, I am just doing it myself. I have yet to hear a good thing about a hedge fund and we all know fees are the enemy of gains. While anecdotal, look to Warren Buffet's advice to his heirs. 90/10 AA in indexes and call it a day. That may be a bit risky for your blood, but I don't think he is far off the mark. Especially at 8-9 figures, you can afford to lose a lot in a stock portion (assuming you aren't living MC Hammer insanely) to really affect a huge upside. See here: https://personal.vanguard.com/us/insigh ... llocations. Even at 80/20, an average of 9.6% means you double your money every ~7.5 years. Over time with 8-9 figures... you are doubling your money every decade probably without much effort and that is an insane amount of money.

It seems to me except for taxes considerations (which aren't horrible short of estate issues) a huge portfolio is easier to manage as a few basis points of inefficiency here or there doesn't matter.

User avatar
patriciamgr2
Posts: 788
Joined: Mon Nov 19, 2007 3:06 pm

Re: What is your experience managing a 8 or 9 digit portfoli

Post by patriciamgr2 » Mon Aug 25, 2014 2:09 am

My advice is second-hand from a small sample of HNW investors who switched from trust companies or large investment houses (Goldman, ML, etc.) to managing all or part of their assets on their own.

You need an expert tax adviser, lawyer (for estate and asset protection advice) and a good accountant. HNW investors, IMO, should not buy financial products from any of those advisers; they are there to protect your assets from others.

HNW investors whom I know tend (whether explicitly or not) to implement a liability-matching portfolio with super-safe assets first; then they invest the rest of their money according to their risk tolerance. That's a luxury less-affluent investors don't have. A bank with an HNW practice will be able to introduce you to programs that spread CDs across many institutions for each of your individual and trust entities to ensure FDIC protection. That, combined with government-issued bonds & bills, can fill out the liquid, ridiculously-safe part of your portfolio. Given that it's a money loser (after inflation), it would kill me to be paying investment fees on that portion of the portfolio.

Traditionally, HNW investors in a high bracket bought individual muni bonds in their taxable account. Because credit analysis has become more complicated (don't even think about relying on credit ratings alone!), and because outlooks for issuers can change based on political developments, lawsuits on bondholder rights, etc. as well as the usual financial trends--some HNW investors I know who had managed their own bond portfolios in the past now use a professional firm that specializes in bonds (NOT a wire house like ML etc.). The alternative is to use funds/ETFs, and resign yourself to the temporary loss of principal if rates rise. There are enough specific-duration instruments out there to be able to execute a barbell or other strategy if you so desire using funds/ETFs rather than individual bonds. Inflation-protected bond investing is more difficult if you don't have room in your tax-advantaged accounts to do liability matching with e.g. TIPS. You'll need to evaluate whether exposure to equities, real estate, & commodities is sufficient protection. HNW investors I know worry a lot about inflation

In the past, HNW investors have been offered alternatives (hedge funds, etc.) as a way of capturing alpha. It hasn't worked that well--if you judge results after fees/taxes, etc--although being a principal of the GP is generally lucrative!. Even pension funds with far more money than you are turning more to indexing equity exposure.

If you are concerned about tail risks, and want to effect an options strategy to protect against such risks, an advisor may make sense for that part of your portfolio. [Whether any of those strategies mitigate risk over the long-term better than simply reducing equity exposure is open to question.]

In general, I think savvy HNW investors buy advice (either on a project basis or by placing only a portion of their portfolio under management after negotiating fees lower) rather than placing an entire portfolio under a single firm's management. What is disturbing to me is that in addition to AUM fees, some HNW investors were paying hefty indirect fees via inflated bond spreads (or worse, back when prop trading was commonplace, having the desk's mistakes unloaded on their portfolio), fees on underlying funds, processing fees, etc.

I believe a HNW investor needs to be realistic about how much time/effort he is willing to spend on managing a portfolio and whether you have the discipline to stay the course, but rebalance in accordance with your Investment Policy Statement. There's nothing wrong with spending your money outsourcing management in order to buy yourself peace of mind or more free time. [IMO, however, you must be willing to spend enough time to monitor anyone managing your money and test their results against benchmarks you select. Given that, one might conclude it's not much more work to manage the money yourself if you have a simple strategy.] Finally, I believe HNW investors should have a contingency plan in place for professional management in the event of their disability or death (if heir is not as savvy as HNW investor). Good Luck.

Grt2bOutdoors
Posts: 18456
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: What is your experience managing a 8 or 9 digit portfoli

Post by Grt2bOutdoors » Mon Aug 25, 2014 8:39 am

anpaul147 wrote:LadyGeek, my intent is not to turn this forum into UHNW central but rather to hear about people who have managed a large amount of assets on their own. I've seen plenty of posts asking for advice but what about people who are actually quietly doing it ?
I'm new to the world of investing and the bogleheads approach seems a nobrainer for a normal amount of assets but I'm curious about what people do at the high end of the spectrum. There, I would assume, they have access to the most high end advisors, private banks, etc but yet their fees seem to make no sense from a consumer perspective so then they are probably doing it themselves or else giving up a small fortune in fees every year compounding on their own money bearing all the risks. If UHNW individuals are not doing it themselves and are getting their money worth I'd be curious to hear from direct experience (I've read the arguments about hiring help to avoid selling during crashes or folks thinking that paying the price of a luxury car every year is worth not having to keep up with the finance world).
Calpers had $262 Billion in assets invested at the end of 2013. They were invested as follows:
50.6% Global Equties
3.2% Short Term Investments
19.9% Global Debt Securities
3.5% Inflation Protected Assets
10.4% Real Assets
12.4% Private Equity

The first 4 categories can be had utilizing ultra low cost indexed investments. If you feel you need more oomph in your portfolio, you can spend 2.5% or more for exposure to private equity and real assets annually, but you'd better hope the returns come through for you, otherwise you will have negative alpha in the portfolio and lots of angst to go with it.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

jdb
Posts: 1374
Joined: Wed Dec 05, 2012 8:21 pm

Re: What is your experience managing a 8 or 9 digit portfoli

Post by jdb » Mon Aug 25, 2014 5:07 pm

I am certainly not an expert but with my limited experience with HNW families have to disagree with much of this discussion. My experience is the more common attitude is if you have won the game why keep playing. More interested in return of capital than return on capital. Warren Buffet at 90 percent equity is an outlier, in my limited experience rarely above 50 percent equity, lots of real estate and boring muni bonds and TIPS ladders. Inflation is a real concern.

leonard
Posts: 5993
Joined: Wed Feb 21, 2007 11:56 am

Re: What is your experience managing a 8 or 9 digit portfoli

Post by leonard » Mon Aug 25, 2014 5:11 pm

The asset allocation math works the same at $10M as it does at $1k.

At $10M - I would start looking at investing in institutional shares at VG.
Leonard | | Market Timing: Do you seriously think you can predict the future? What else do the voices tell you? | | If employees weren't taking jobs with bad 401k's, bad 401k's wouldn't exist.

Post Reply